Friday, May 30, 2008

`Globalisation in reverse gear as oil prices soar'

may 29th, 2008

dont really see how this affects services very much, it sure can affect manufactured goods. but the cost of shipping is not so high as a % of costs, i imagine. the low cost of labor may make up for it.

---------- Forwarded message ----------
From: ven
Date: May 29, 2008 5:14 PM
Subject: `Globalisation in reverse gear as oil prices soar'
To:

`Globalisation in reverse gear as oil prices soar'  
http://sify.com/finance/fullstory.php?id=14683469
Thursday, 29 May , 2008, 12:54

Toronto: Trade liberalisation and technology may have flattened the world, but rising transport prices will once again make it rounder, says a report by a major Canadian bank.

In its study - "Will Soaring Transport Costs Reverse Globalisation?" the Canadian Imperial Bank of Commerce (CIBC) says soaring oil prices are driving transport costs to such levels that businesses will be forced to seek supplies locally, rather than importing at huge costs from China and India.

"Globalisation is reversible. Higher energy prices are impacting transport costs at an unprecedented rate so much so, that the cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today," CIBC chief economist Jeff Rubin and co-author Benjamin Tal say in their report.

In fact, soaring global transport costs have already offset all the trade liberalisation efforts of the past three decades, the report points out.

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1 comment:

Ghost Writer said...

Services - specially services that India provides (IT and ITES) are from an infrastructure perspective actually getting cheaper. Connectivity is getting cheaper and will in the future too - sort of Moore's law of network bandwidth. Indian companies are loosing because the dollar fetches a lot less.

The problem is not expensive oil - it is the falling dollar. Indian software companies can get through because they can cut salaries without provoking large scale social unrest - Chinese manufacture cannot because they cannot cut salaries - it is already slave wage out there.

The key to enhancing manufacturing competitiveness for us is
1- Lean Design (or Gandhian engineering) based products that compete at the lower end of the pyramid - aka the Nano
2- Invest in High end engineering services (chip design, ship building, aircraft build & repair and space) that can spur competitive manufacturing downstream at some point in time. That way you can grab a more sustainable competitive advantage - as opposed to making soft toys on the cheap